Subsidies – Aeropolitical Updateshttp://aeropolitics.com
Aeropolitical Updates by Aviation ProfessionalsWed, 21 Feb 2018 07:30:42 +0000en-UShourly1https://wordpress.org/?v=4.9.4Qatar-US civil aviation talks to pave the way for “fair competition”http://aeropolitics.com/qatar-us-civil-aviation-talks-pave-way-fair-competition/
http://aeropolitics.com/qatar-us-civil-aviation-talks-pave-way-fair-competition/#respondTue, 06 Feb 2018 05:00:03 +0000http://aeropolitics.com/?p=152838“The US came to an agreement with the Qatar Civil Aviation Authority on putting to rest the ongoing controversy under the Open Skies agreement about subsidies and other sorts of criticisms that the American airline industry had been making towards the Qatari airline industry,” Gliha said.

]]>Results of the recent talks between the United States and Qatar centered on civil aviation would pave the way for “fair competition” between major stakeholders in the industry.

This was the assessment of Charge d’Affaires, Ryan Gliha, of the US embassy in Doha, who asserted that officials from the two nations had settled on an understanding that addresses the issues that had been raised by airline stakeholders coming from their countries.

“The US came to an agreement with the Qatar Civil Aviation Authority on putting to rest the ongoing controversy under the Open Skies agreement about subsidies and other sorts of criticisms that the American airline industry had been making towards the Qatari airline industry,” Gliha said.

He continued:

“We’re very happy to have this conclusion and agreement with the Qatari government on this and that’s satisfactory to our government, the Qatari government, and the industries of both countries. It’s creating a fair competition between everyone’s airline industry and that’s good for both industries, and also the consumers that are using all these services.

Gliha remarked that the understanding on civil aviation was one of the high points that were tackled during the first-ever US-Qatar Strategic Dialogue that was staged in Washington DC.

During the discussions, the Deputy Prime Minister and Foreign Minister, Sheikh Mohamed bin Abdulrahman al-Thani and US Secretary of State Rex Tillerson were both welcoming of the result of the recent talks on civil aviation geared at promoting healthy competition in the global aviation sector, while also maintaining the framework of the Open Skies of United States foreign aviation policy.

]]>http://aeropolitics.com/qatar-us-civil-aviation-talks-pave-way-fair-competition/feed/0Airline executives laud Trump administration’s arrangement with Qatar over subsidieshttp://aeropolitics.com/airline-executives-laud-trump-administrations-arrangement-qatar-subsidies/
http://aeropolitics.com/airline-executives-laud-trump-administrations-arrangement-qatar-subsidies/#respondFri, 02 Feb 2018 05:00:10 +0000http://aeropolitics.com/?p=149644Airline executives and labor groups heaped praise on the agreement that was reached between the Trump administration and Qatar geared towards resolving a dispute over alleged unfair subsidies. “Today’s agreement by the State of Qatar is a strong first step in a process for commercial transparency and accountability, and we remain committed to working with …

]]>Airline executives and labor groups heaped praise on the agreement that was reached between the Trump administration and Qatar geared towards resolving a dispute over alleged unfair subsidies.

“Today’s agreement by the State of Qatar is a strong first step in a process for commercial transparency and accountability, and we remain committed to working with the administration to address the harmful trade violations by the United Arab Emirates as well,” relayed Delta CEO, Ed Bastian.

He added:

“We are grateful to the Trump administration for working to restore a level playing field for the U.S. aviation industry and to the tens of thousands of Delta people who have made their voices heard in an effort to protect millions of American jobs and put an end to unfair competition.”

The plaudits arrived after the US State Department disclosed that it had forged an agreement with Qatar to tackle a long-standing row over alleged state subsidies Qatar Airways had been receiving.

The agreement compels Qatar to publicly reveal its financial transactions and join in on an external audit in a bid to promote transparency, said the State Department.

The US aviation industry has long been up in arms over what they claim to be subsidies that Qatar’s government pumps into Qatar Airways. They allege that this is in violation of the international Open Skies Agreement and creates unfair competition.

“Billions of dollars’ worth of subsidies later, it’s nice to know that at least one of the ME3 airlines is maneuvering toward a level playing field,” said Captain Dan Care, the President of the Allied Pilots Association, said in a statement.

The administration made the agreement public during the U.S.-Qatar Strategic Dialogue meeting between Defense Secretary James Mattis, State Department Secretary Rex Tillerson and both the Qatari foreign and defense ministers.

“Qatar is a strong partner and a longtime friend of the United States,” Tillerson remarked.

]]>http://aeropolitics.com/airline-executives-laud-trump-administrations-arrangement-qatar-subsidies/feed/0US Government set to finalize agreement with Qatar to ease “Open Skies” conflicthttp://aeropolitics.com/us-government-set-finalize-agreement-qatar-ease-open-skies-conflict/
http://aeropolitics.com/us-government-set-finalize-agreement-qatar-ease-open-skies-conflict/#respondWed, 31 Jan 2018 06:30:51 +0000http://aeropolitics.com/?p=147530The United States government has relayed to US carriers that Secretary of State, Rex Tillerson, would be finalizing an agreement with Qatar wherein state-owned Qatar Airways would pledge to be more transparent with its financial records, and declared that it holds no plans to operate fifth freedom flights to the US. The upcoming accord comes …

]]>The United States government has relayed to US carriers that Secretary of State, Rex Tillerson, would be finalizing an agreement with Qatar wherein state-owned Qatar Airways would pledge to be more transparent with its financial records, and declared that it holds no plans to operate fifth freedom flights to the US.

The upcoming accord comes after the State Department told US airlines in December that it wouldn’t revisit negotiations regarding Open Skies agreements with the United Arab Emirates (UAE) and Qatar. Rather, it would engage the Gulf countries in talks over so-called subsidies to Gulf airlines.

US major airlines American Airlines, Delta Air Lines and United Airlines have long claimed that billions of dollars in state subsidies provided to Emirates Airline, Etihad Airways and Qatar Airways have placed them at a disadvantage and violated the US’ Open Skies agreements with the two countries.

American, Delta and United have expressed their appreciation for the anticipated agreement between the US and Qatar.

“This landmark action will help create a level and fair playing field for American Airlines and other US carriers,” said American Chairman and CEO Doug Parker in a statement.

Parker added:

“The [Trump] administration’s actions today thoughtfully address the illegal subsidies received by Qatar Airways, and most importantly, support [US] workers.”

Though the agreement is not expected to be at the same level of a binding treaty and would not formally change the existing US-Qatar Open Skies agreement, American, Delta and United see the move as a political commitment by the Qatari government to the US government.

Qatar is expected to pledge that Qatar Airways would indeed comply with internationally accepted accounting and auditing standards when reporting financial results. It is also expected to conduct all transactions on generally accepted commercial terms.

In addition, Qatar Airways would also say it has no plans to operate fifth freedom flights to the US.

A high-level Qatari delegation is currently in Washington for a “strategic dialogue” with the State Department and other US government departments.

The issue of US major airlines’ complaints about claimed subsidies to Qatar Airways is expected to be one the topics that would be tackled in a meeting with Tillerson.

The Qatari government stated that “a number of agreements, MOUs and letters of intent” between the two governments would be inked this week.

]]>http://aeropolitics.com/us-government-set-finalize-agreement-qatar-ease-open-skies-conflict/feed/0Qatar expected to release financial information regarding Qatar Airwayshttp://aeropolitics.com/qatar-expected-release-financial-information-regarding-qatar-airways/
http://aeropolitics.com/qatar-expected-release-financial-information-regarding-qatar-airways/#respondTue, 30 Jan 2018 06:00:50 +0000http://aeropolitics.com/?p=146463Qatar is set to divulge detailed information regarding the finances of the state-owned carrier, Qatar Airways. The development was made public by the United States Department, in a move that is said to come as a result of the enormous pressure placed on the Qatar by US airlines to disclose any potential subsidies it may …

]]>Qatar is set to divulge detailed information regarding the finances of the state-owned carrier, Qatar Airways.

The development was made public by the United States Department, in a move that is said to come as a result of the enormous pressure placed on the Qatar by US airlines to disclose any potential subsidies it may have received.

Under the terms of the understanding, U.S. officials said Qatar Airways would be issuing audited financial reports within a year and within two years, it must also divulge substantial new transactions with state-owned enterprises.

The largest U.S. carriers –American Airlines Group Inc., United Continental Holdings Inc. and Delta Air Lines Inc. – have called on the US government to take a closer look into the conduct of the three major Middle Eastern carriers under its “Open Skies” pacts.

The US carriers have long believed that Gulf airlines are being unfairly subsidized by their governments, with over $50 billion in subsidies said to be provided.

Qatar and the United States are expected to publicize details of the understanding on aviation issues at a U.S.-Qatar strategic dialogue in Washington. Expected to grace the said high-level gathering are U.S. Secretary of State Rex Tillerson and Defense Secretary James Mattis, along with senior Qatari officials, U.S. State Department officials said.

The voluntary agreement comes after a long and tedious negotiation period with senior U.S. and Qatari officials in the past few weeks.

Qatar’s Civil Aviation authority told the U.S. government that Qatar Airways had no current plans to offer so-called “fifth freedom flights” that lets an airline fly between foreign countries as part of services to and from its home country.

Qatar must take measures to guarantee that the transactions are made on commercial terms. The disclosures could aid U.S. carriers make the case that the airline is receiving unfair government subsidies.

The voluntary agreement however, does not to apply to Etihad or Emirates, both of which are headquartered in the United Arab Emirates. The State Department has plans to hold new discussions with UAE as early as next week.

]]>http://aeropolitics.com/qatar-expected-release-financial-information-regarding-qatar-airways/feed/0United States planning talks with Qatar and UAE on airline subsidieshttp://aeropolitics.com/united-states-planning-talks-qatar-uae-airline-subsidies/
http://aeropolitics.com/united-states-planning-talks-qatar-uae-airline-subsidies/#respondThu, 14 Dec 2017 07:30:50 +0000http://aeropolitics.com/?p=112296The United States State Department is gearing up for talks with Qatar and the United Arab Emirates regarding allegations that they have been providing subsidies amounting to billions of dollars to their state-backed airlines. The Trump administration will be looking to secure commitments on financial transparency, said sources that had knowledge about the proceedings. The …

]]>The United States State Department is gearing up for talks with Qatar and the United Arab Emirates regarding allegations that they have been providing subsidies amounting to billions of dollars to their state-backed airlines.

The Trump administration will be looking to secure commitments on financial transparency, said sources that had knowledge about the proceedings.

The meetings are set to commence as early as this week. US airlines have long harped on the alleged unfair subsidies that Qatar Airways Ltd., Emirates and Etihad Airways PJSC receive.

The State Department will also probe about the Middle Eastern airlines’ plans for “fifth freedom” flights, which start in an airline’s home country and conclude in a different nation before moving on to the U.S.,

The sources disclosed that U.S. officials would ask the Persian Gulf countries to keep an arm’s-length approach toward their carriers.

Government-to-government discussions would mark an invigorated focus on the airline trade spat, which has been going on back and forth for several years now.

Earlier this year, President Donald Trump announced that the Persian Gulf carriers received huge government subsidies. He however, did not mention any action that he might even consider.

The Obama administration had “informal, technical” discussions with representatives of Qatar and the U.A.E. late last year but that too did not result in any action.

The Gulf carriers “are harming American jobs and the U.S. aviation industry and we appreciate that the administration is acting to resolve these issues with the governments of the U.A.E and Qatar,” said the Partnership for Open and Fair Skies, which embodies Delta Air Lines Inc., United Continental Holdings Inc., American Airlines Group Inc. and other airline unions.

The U.S. Travel Association said the dialogues would be observed outside of formal “open skies” agreements.

“The Big Three U.S. airlines’ core demand – that the administration halt flights by airlines flagged in Qatar and the U.A.E, and renegotiate U.S. open skies agreements with those countries – was, thankfully, set aside because their arguments fell well short of the mark,” said U.S. Travel Chief Executive Officer Roger Dow.

]]>http://aeropolitics.com/united-states-planning-talks-qatar-uae-airline-subsidies/feed/0US-UAE Business Council believes Open Skies agreements will stay puthttp://aeropolitics.com/us-uae-business-council-believes-open-skies-agreements-will-stay-put/
http://aeropolitics.com/us-uae-business-council-believes-open-skies-agreements-will-stay-put/#respondTue, 05 Dec 2017 06:30:24 +0000http://aeropolitics.com/?p=104482The US-UAE Business Council is confident in its belief that the United States government will not revoke the Open Skies agreements between the two nations. This, according to the President of influential membership body, Danny Sebright, who said: “I think we’ve done a good job of inoculating against various efforts by the US carriers to …

]]>The US-UAE Business Council is confident in its belief that the United States government will not revoke the Open Skies agreements between the two nations.

This, according to the President of influential membership body, Danny Sebright, who said:

“I think we’ve done a good job of inoculating against various efforts by the US carriers to find a champion on the inside of [President] Trump’s administration. Now I think we’re at a good place with it,” Sebright said.

“The UAE Ambassador and his team, as well as key US firms, have done a really good job of informing the Trump administration of the importance of [maintaining Open Skies agreements between the two countries].

“Saying that, it is still a critically important issue, and we have work to do to prevent legislative action that is not supported by the Trump administration,” Sebright added.

For years now, the US carriers have asked the federal government to put a stop to Gulf carriers’ rapid expansion to the country, which they say represents “unfair competition” and breaches Open Skies agreements.

They also claim that the three largest Gulf carriers – Etihad, Emirates and Qatar Airways – are the beneficiaries of subsidies from their governments to “unfairly” aid their growth. All three refute the claims and argue they have brought considerable economic benefits to the US.

Sebright said his council has asked to convey “the facts from our point of view,” in Washington circles, and argue the notion that the Gulf airlines are deeply subsidized.

“The bottom line is that Open Skies doesn’t have anything to do with subsidies. There is no provision in Open Skies anywhere that deals with subsidies. The US carriers are trying to invent an issue over subsidies and use existing bilateral Open Skies agreements as a false basis to change policy,” he said.

“What we need now is for the Trump team to review the issue, deal with the false allegations and put this issue behind us once and for all,” Sebright continued.

An amendment to take away a longstanding tax exemption for foreign airlines was removed from Donald Trump’s tax reform bill at the weekend. The proposal was included in the bill last month by Senator Johnny Isakson of Georgia, a state that Delta calls home.

The aviation industry last weekend lauded the news that the amendment had been removed, with Abdul Teffaha, secretary-general of the Arab Air Carriers Organization (AACO), proudly declaring that, “reason had prevailed”.

Abu Dhabi’s Etihad Airways said that the proposed tax “failed a broad set of international and US legal obligations and received almost universal opposition when its true purpose was revealed.”

The US-UAE Business Council functions as a facilitator for business relations between the two countries. Sebright has solid connections with Washington, having started his career as an intelligence officer in the Defense Intelligence Agency, serving in the Gulf, before moving on to work for former US defense secretary Donald Rumsfeld.

The organization has since grown from 80 member companies in 2015 to more than 150 companies today.

“The UAE is the nexus between East and West,” Sebright said. “Even despite [regional tensions], this place is still first choice for an American company coming to do business in the region.”

However, he cautioned that US businesses in the UAE have to be aware enough not to get caught up in “Trump rhetoric” about American jobs being moved abroad.

“Opening a new office in the UAE may mean tens of new jobs there, but the ensuing sales can represent hundreds if not thousands of new jobs back home. Companies must be careful to communicate this message,” he said.

]]>http://aeropolitics.com/us-uae-business-council-believes-open-skies-agreements-will-stay-put/feed/0Smaller U.S. airlines bash Senate tax bill provision targeting Gulf carriershttp://aeropolitics.com/smaller-u-s-airlines-bash-senate-tax-bill-provision-targeting-persian-gulf-carriers/
http://aeropolitics.com/smaller-u-s-airlines-bash-senate-tax-bill-provision-targeting-persian-gulf-carriers/#respondFri, 01 Dec 2017 06:30:23 +0000http://aeropolitics.com/?p=101677JetBlue Airways, Hawaiian Airlines and other U.S. passenger and cargo carriers are vehemently opposing a provision in the Senate tax bill that would mandate several foreign airlines to pay U.S. corporate taxes on part of their profits. The three major U.S. carriers — Fort Worth-based American Airlines, Atlanta-based Delta Air Lines and Chicago-based United Airlines …

]]>JetBlue Airways, Hawaiian Airlines and other U.S. passenger and cargo carriers are vehemently opposing a provision in the Senate tax bill that would mandate several foreign airlines to pay U.S. corporate taxes on part of their profits.

The three major U.S. carriers — Fort Worth-based American Airlines, Atlanta-based Delta Air Lines and Chicago-based United Airlines — are embroiled in a long-running trade row with Persian Gulf carriers Emirates Airline, Etihad Airways and Qatar Airways.

U.S. Sen. Johnny Isakson, R-Georgia, recently placed an amendment to the Senate tax overhaul bill that would necessitate the Gulf carriers to pay the U.S. corporate taxes. Isakson, who represents Delta’s home state, expressed that his proposal is geared to foster fairness and competition.

The four carriers, which make up a coalition called U.S. Airlines for Open Skies, lobbied for Congress to repeal section 14505 of the Senate Tax Cuts and Jobs Act. The coalition made public a statement calling the provision “another poorly veiled attempt by Delta to shield itself from competition.”

“This special interest ploy was designed to hurt the Gulf carriers but would actually impact airlines from as many as 14 countries and territories, such as Jordan, Ethiopia and Malaysia,” the statement says. “In addition, the provision opens the door to retaliatory taxes that would harm U.S. airlines, particularly U.S. cargo carriers.”

“Delta appears unconcerned about the collateral damage of its multi-million dollar lobbying campaign but Congress should be,” the statement read.

In addition to Delta (NYSE: DAL), American Airlines Group Inc. (Nasdaq: AAL) Chief Executive Doug Parker has zealously accused the Gulf airlines of competing unfairly in the U.S. by receiving tens of billions of dollars in state subsidies. The Gulf airlines have denied such claims.

Under existing international agreements known as Open Skies agreements, most foreign carriers pay zero taxes on gross income they earn when they fly into the United States. U.S. carriers receive the same treatment when they fly into most foreign airports. Airlines still pay landing fees and other charges to land in foreign airports.

Challengers of Isakson’s amendment say it would basically destroy decades of precedent — which the U.S. has long backed — on the taxation of international aviation.

America’s three biggest airlines charge the Gulf carriers of allegedly violating Open Skies agreements by taking in more than $50 billion in state subsidies since 2004.

]]>http://aeropolitics.com/smaller-u-s-airlines-bash-senate-tax-bill-provision-targeting-persian-gulf-carriers/feed/0United States: Senate tax proposal could prove costly for foreign carriershttp://aeropolitics.com/united-states-senate-tax-proposal-prove-costly-foreign-carriers/
http://aeropolitics.com/united-states-senate-tax-proposal-prove-costly-foreign-carriers/#respondWed, 29 Nov 2017 06:30:03 +0000http://aeropolitics.com/?p=99796A proposal included in the Senate tax bill could prove costly to foreign airlines, including Gulf-based airlines that have been accused of receiving billions of dollars in unfair state subsidies. The provision would compel specific carriers that are based outside of the country to United States corporate taxes on money earned in the country if …

]]>A proposal included in the Senate tax bill could prove costly to foreign airlines, including Gulf-based airlines that have been accused of receiving billions of dollars in unfair state subsidies.

The provision would compel specific carriers that are based outside of the country to United States corporate taxes on money earned in the country if U.S. airlines do not have at least two weekly departures to or arrivals from the foreign carrier’s home country, and if there is no reciprocal tax treaty between the U.S. and the carrier’s country.

Sen. Johnny Isakson, R-Ga., who considers Atlanta – Delta Air Lines’ home state – his home as well, initiated the proposal.

He has publicly said that the amendment would “protect Georgia airline employees by ending a tax exemption for airlines based in countries that deny fair market access for U.S.-based airlines.”

Delta, United Continental Holdings and American Airlines Group aired their grievances to the Trump administration earlier this year that the government-supported Gulf airlines have received $50 billion in subsidies from their governments.

In a letter penned to Secretary of State Rex Tillerson back in February, the chief executives of the three carriers jointly wrote that “the subsidies allow the Gulf carriers to operate without concern for turning a profit” and violate Open Skies agreements, which give foreign airlines access to international routes.

The proposed measure could put a dent into Middle East airlines such as Abu Dhabi-based Etihad, Dubai-based Emirates Airlines and Doha-based Qatar Airways because they don’t have reciprocal tax agreements with the U.S.

“Etihad Airways is aware of the language in the Senate tax reform bill, which is widely agreed to be inappropriate under US law and contrary to several international agreements,” an Etihad spokesperson said.

“We are working with a broad coalition of industry representatives to inform lawmakers on this issue, which appears to be the result of continued anticompetitive efforts by one or more of the Big 3 US legacy carriers.”

Meanwhile, the International Air Transport Association (IATA), a trade group representing many of the world’s airlines, argued that the Senate tax provision would “upend decades of precedent” on foreign aviation taxation.

“Foreign governments — even those not directly affected by the proposed language — could be tempted to follow the U.S. example and impose reciprocal taxes,” remarked IATA spokesman Perry Flint.

While U.S. carriers have accused the airlines of receiving unfair government support, some U.S. airports have lauded these airlines and in at least one case gave incentives.

Qatar Airways recently started operating cargo flights into Pittsburgh International Airport. Reports have indicated that the airline would receive $15,500 per flight, or about $728,500 for the first six months of its contract.

Gulf carriers are expanded their operations to other locales in North America as well. Etihad launched a weekly cargo route to Miami International Airport earlier this month, joining Qatar Airways. A spokesman for the airport revealed that the airlines did not apply for any subsidies or incentives.

]]>http://aeropolitics.com/united-states-senate-tax-proposal-prove-costly-foreign-carriers/feed/0Row between U.S. and Persian Gulf carriers set to intensifyhttp://aeropolitics.com/row-u-s-persian-gulf-carriers-set-intensify/
http://aeropolitics.com/row-u-s-persian-gulf-carriers-set-intensify/#respondMon, 27 Nov 2017 06:30:26 +0000http://aeropolitics.com/?p=97922The years long spat between United States and Persian Gulf carriers – Emirates, Qatar Airways and Etihad Airways PJSC – is about to reach fever pitch. This after Etihad said that a measure that make part of the Senate’s tax-reform bill contains “language that is inappropriate under U.S. law and runs contrary to several international …

]]>The years long spat between United States and Persian Gulf carriers – Emirates, Qatar Airways and Etihad Airways PJSC – is about to reach fever pitch.

This after Etihad said that a measure that make part of the Senate’s tax-reform bill contains “language that is inappropriate under U.S. law and runs contrary to several international agreements.”

The remarks are about an addition to the bill that calls for foreign airlines from nations lacking income-tax treaties with the U.S. to pay corporate duties where American carriers operate fewer than two services a week to those countries, the Financial Times reported.

The move looms to spark anew a row over the quick expansion of Gulf carriers, which U.S. rivals including Delta Air Lines Inc., American Airlines Group Inc. say is made possible through illegal state aid. While operators from countries such as Suriname and Fiji would also suffer the bill’s effects, the wording of the measure means it wouldn’t affect European companies.

Etihad said it’s collaborating with “a broad coalition of industry representatives” to get lawmakers to act on the issue, adding that it “appears to be the result of continued anticompetitive efforts by one or more of the ‘big three’ U.S. legacy carriers.”

Dubai-based Emirates, the Middle East’s top airline and the world’s biggest long-haul carrier, has indicated that it is aware of the proposal, and did not offer up any more information.

The measure was presented by Johnny Isakson, a Republican senator for Georgia, the home state of Atlanta-based Delta.

An initial push for action against Gulf growth from U.S. carriers included a huge campaign for the suspension of the country’s bilateral air services arrangements with Qatar and the United Arab Emirates. The administration of former U.S. President Barack Obama did not move the bid forward.

Etihad reported losses amounting to $1.87 billion last year as it wrapped its head around a disastrous investment approach, a slump in oil-related travel and pressures from the U.S., which acted to limit travel to America by people from a number of Muslim-majority nations and later slapped on restrictions on using electronic devices in U.S.-bound planes departing Mideast hubs.

]]>http://aeropolitics.com/row-u-s-persian-gulf-carriers-set-intensify/feed/0United States: Elimination of income tax exemptions for certain airlines being floatedhttp://aeropolitics.com/united-states-elimination-income-tax-exemptions-certain-airlines-floated/
http://aeropolitics.com/united-states-elimination-income-tax-exemptions-certain-airlines-floated/#respondMon, 20 Nov 2017 06:00:52 +0000http://aeropolitics.com/?p=92316A United States congressional proposal that would take away income tax exemptions for specific airlines could impact major carriers from the Gulf, potentially making an already tense situation between U.S. airlines and their Middle East rivals, even worse. U.S. carriers have long expressed their desire for the federal government to step in in what they …

]]>A United States congressional proposal that would take away income tax exemptions for specific airlines could impact major carriers from the Gulf, potentially making an already tense situation between U.S. airlines and their Middle East rivals, even worse.

U.S. carriers have long expressed their desire for the federal government to step in in what they perceive to be unfair competition by the three major Gulf airlines.

The proposal, which is included in the Senate tax-cut plan, calls for airlines headquartered in foreign countries to pay the U.S. incorporate tax rate if: 1) the carrier’s home country does not have an income tax treaty with the United States and 2) the carrier’s country of origin has fewer than two arrivals and departures, per week, operated by major U.S. airlines.

Qatar Airways, Emirates and Etihad Airways have long been accused by its American counterparts of receiving subsidies from their governments. The Gulf carriers have vehemently denied the accusation.

If the proposal is ratified, it could leave the Gulf carriers in a more vulnerable state since their home countries – the United Arab Emirates and Qatar – do not have income tax treaties with the United States, according to the Internal Revenue Service website.

A number of countries also run the risk of being affected during a time when perceived discrepancies in U.S. trade agreements are being closely monitored by U.S. corporations and the federal government.

The language in the Senate proposal paves the way for a crackdown in tax leniency for these and other airlines. This would likely be well received by American carriers, which have for years asked the U.S. government to intervene in the dispute.

Under U.S. tax treaties, entities of foreign countries are either freed or pay a lowered rate on their income, and vice versa for U.S. entities abroad. Reciprocity agreements, however, are less formal deals that don’t have an official accord, according to tax attorney Sam Brotman of Brotman Law.

“Reciprocity agreements are usually with countries that are not necessarily 100 percent friendly with the U.S.” Brotman said. “We’ll call it a handshake deal.”

The bill’s wording figures to intensify an already anxious standoff between U.S. airlines and Gulf carriers.

The addition was out in place by U.S. Senator Johnny Isakson of Georgia.

“This provision supports American jobs by providing a level playing field and mutual fairness in international passenger aviation,” said Isakson’s spokeswoman, Marie Gordon

“Foreign airlines should not receive preferential tax treatment if their countries choose not to open their markets to U.S. companies.”